Written by Paul Weissler

The good news about the California&nbsp;zero-emission vehicle (ZEV) mandate is that&nbsp;it is greatly simplified starting in 2018. What will be a challenge: the new regulation, formulated by the California Air Resources Board (CARB) and also followed by Oregon and eight&nbsp;other so-called &quot;Section 177&quot; states, is more difficult each succeeding year. There are&nbsp;fewer ways in which it can be met.&nbsp;Nearly 30% of the U.S. car/light duty truck market is tied to the ZEV mandate. CARB data show transportation accounted for 38% of California greenhouse gas (GHG/CO2) emissions, reported for the 2002-04 period. Regulation is intended to reduce GHG by 40% by 2030, and 80% by 2050. The ZEV mandate seems to provide a clearcut path for the automotive sector. Further, ZEVs are seen avoiding deterioration factors associated with ageing conventional engines. Who&quot;s&nbsp;exempt and who&nbsp;gets breaks? Small carmakers who sell up to 4,500 units per year in California (up to 10,000 for independent makers) are exempt from the ZEV mandate. Intermediate size OEMs (up to 20,000 units/yr with annual revenue of $40 billion or below) get some significant breaks. Because the &quot;EV&quot; in ZEV does not necessarily refer to an electric vehicle, CARB uses BEV as its acronym for battery electrics. Prior to 2018, ZEV mandates could be satisfied with a near handful of all-electric vehicles, plus varying credits for some others, including straight hybrids-- called Advanced Technology Partial Zero Emission Vehicles (AT PZEV), plug-ins (PHEV, in pre-2018 period also called Enhanced Technology AT PZEV) and basic non-hybrid&nbsp;PZEVs. The basic&nbsp;PZEV had no effect on GHG, but it satisfied California&quot;s SULEV (Super Ultra-Low Emission Vehicle) regulation&nbsp;which required a car be 90% lower in emissions (hydrocarbons, carbon monoxide, nitrogen oxide and particulates) than the average of conventional vehicles. PZEV includes engine and catalyst system modifications and zero evaporative emissions, using a canister vent trap, a carbon vent at the engine inlet and improved sealing. It carries a 15 year/150,000-mi emissions warranty, and has specific on-board diagnostics. PZEVs and AT PZEVs credits ended completely in 2017, but leftovers can be &quot;banked&quot; for 2018-on use. However, they&quot;re deeply &quot;devalued,&quot; to 25% for intermediate-size OEMs, to just 6.75% for large makers. New category - TZEV The Enhanced Technology AT PZEV meant it met SULEV and had a minimum PHEV 10-mi all-electric range. Along with the hydrogen-fueled internal combustion engine (ICE with a 250-mi range or greater on the EPA city cycle, or &quot;UDDS&quot;). It&quot;s in a new category called TZEV (&quot;Transitional PZEV&quot;) and qualifies for 2018-on credits. UDDS range, where used (as for a vehicle&quot;s all-electric range), generally is at least 30% greater than the vehicle label number. There&quot;s also a 0.2 TZEV credit bonus for greater than 10 mi all-electric range on the US06 (heavy acceleration) cycle. Engineers know that nothing in a government regulation is ever truly simple. Only the following vehicle types are eligible for ZEV credits from 2018-on: (1) a true BEV, with its numerical credit (capped at 4.0) based on rated UDDS range; (2) a fuel cell vehicle; 3) the as-noted &quot;TZEV,&quot; (4) neighborhood electric vehicle as used in&nbsp;adult communities, with top speeds in the 20-25 mph range (eligible for a modest credit). Finally there&quot;s one we&quot;ll likely be seeing a lot of: the &quot;BEVx,&quot; a battery electric vehicle with a minimum 75 mi all-electric range that includes&nbsp;a SULEV-certified combustion&nbsp;engine and a&nbsp;fuel tank that extends range to no more than the all-electric. BMW&quot;s I3 electric, for example, has a range of 114-mi on batteries, and a $3850 range extender engine/generator option, which with a 1.9-gal tank increases total range to 180 mi. Its&nbsp;twin-cylinder 650-cc&nbsp;scooter engine&nbsp;engages to recharge the battery pack, maintaining its level at about 30%. Fuel cell vehicles are in the same category as BEVs, and can earn similar credits. Internal combustion engines that run on hydrogen and have a range of at least 250 mi (UDDS) start with a 0.75 ZEV credit, but can earn up to 0.5 more with what is called a VMT (Vehicle Miles Traveled) allowance. This is based on a formula originated for parallel hybrid PHEVs, to determine an &quot;equivalent all-electric range&quot; (EAER). The 2018 mandate specifies a large OEM deposit ZEV credits equal to 4.5% of its sales in 2018, although 2.5 of the 4.5 (55%) can be met with TZEV credits. The total requirement rises by 2.5 percentage points per year, with the TZEV number increasing by 0.5. Intermediate-size makers can fulfill all ZEV requirements with TZEV credits, an obviously helpful break. Further, ZEV credits accumulated prior to 2018 can be banked, but ZEV shortfalls can&quot;t be covered with CAFE credits. Indeed Fiat Chrysler has stored 90,722 credits (mostly purchased from Tesla, according to industry sources) to cover its fleet miles-per-gallon deficiencies.&nbsp;Although it has sold an unspecified number of Fiat 500e BEVs in California and Oregon since 2013, the sales have been reportedly modest.&nbsp;The Pacifica minivan PHEV could provide some TZEV credits. Contrast with 2009-17 regulations The new rules contrast with the 2009-17 regulations, which put makers with up to 60,000 California sales in the intermediate category, allowed them to meet ZEV requirements with PZEVs, and set large manufacturers with a rising ZEV scale that hit 14% for the 2015-17 period. However, only 3.0% had to be actual ZEV (3000 credits on California sales of 100,000, or 750 vehicles with a credit rating of 4.0). The reduction from 60,000 to 20,000 unit sales was the result of rulemaking evaluations and consideration of worldwide sales. Previously (2008-2010 averages) only General Motors, Fiat Chrysler, Ford, Nissan, Toyota and Honda were in the California &quot;large&quot; category. Each ZEV carried an all-electric range multiple starting at 2.0 for 50 mi. The rest could be generated with credits from PZEVs, hybrids (AT PZEVs), and Enhanced AT PZEVs. There was an additional allowance for PZEVs that ran on hydrogen or CNG. Other special allowances, covered PHEVs with a range of equal or greater than 10 mi, and vehicles with &quot;advanced componentry,&quot; such as regenerative braking and idle stop/restart. For years the industry relied on ZEV sales in California, where they are heavily advertised,&nbsp;the climate is more favorable and there is some charging infrastructure in place. Sales &quot;traveled,&quot; meaning&nbsp;were proportionally applicable to all the Section 177 (mostly Northeastern and Oregon)&nbsp;states. Companies without a BEV program could buy credits, as from Tesla. With the 2018 mandate, only non-California fuel cells &quot;travel&quot; and if they &quot;cross the country&quot; (sold in Oregon, also credited to New Jersey), there&quot;s a 30% credit fee (130 for 100 credits). Overcompliance a new path that reduces ZEV mandate <br /> In addition to banked ZEV credits, which can be used through to 2025 as needed, there is &quot;GHG-ZEV overcompliance.&quot; An OEM can propose to surpass its fleet average standard by at least 2.0 g CO2 target value (based on model type and vehicle footprint), on UDDS, the EPA Federal Test Protocol City CO2 g/mi (55% ) and EPA Highway Fuel Economy Test (45%). A maker&quot;s ZEVs must be included in the target value calculation. Although projected data is not available, CARB has estimated some 10-20% of California sales would go for the overcompliance credits. They&quot;re limited to the model year in which they&quot;re earned, can only be used by the earning manufacturer (no trades). There&quot;s a 50% cap on their use for the 2018 and 2019 ZEV mandate, and the cap drops to 40% for 2020 and 30% for 2021. Another compliance path penalty-free pooling--also was instituted to encourage ZEV sales in the Section 177 states, wherever&nbsp;demand might be stimulated. Increasing sales in the&nbsp;northeast clearly is difficult because most of these states face cold winters and the problem of range reduction from vehicle heating. Without mitigation from specific engineering, such as vehicle pre-heating, range extender engines, heat pumps and perhaps heat storage, ZEVs are likely a hard sell. If an automaker misses its ZEV requirement, the deficit must be made up by the next model year, using only ZEV credits. Intermediate-size makers may be given up to three years, and use both ZEV and TZEV credits. Failure subjects a carmaker to a $5000 per credit shortfall penalty.

Date written: 07-Dec-2017 06:07 EST

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